2018 Corporate Human Rights Benchmark

23 November 2018

Last week saw the publication of the 2018 Corporate Human Rights Benchmark (CHRB). This multi-stakeholder initiative assesses the performance of 101 of the world's largest publicly traded companies in the apparel, agricultural and extractives sectors, against a range of key human rights performance indicators. By having robust human rights policies, risk management systems and processes in place, companies can increase their capacity to avoid or mitigate the negative impacts associated with both their direct and indirect operations.

The stark findings of the first full version of the Benchmark have caught the attention of a wide audience - from human rights organisations, the SRI and CSR community and the mainstream press amongst others. As Steve Waygood, the Chair of CHRB, stated:

"The overall picture is deeply concerning, most companies score poorly on the Benchmark, indicating weak implementation of the UN Guiding Principles on Business and Human Rights."

Diving into the Detail

The CHRB methodology consists of key performance indicators across six Measurement Themes:

Governance & Policies (10% of the overall company score);

Embedding Respect & Human Rights Due Diligence (25%);

Remedies & Grievance Mechanisms (15%);

Company Human Rights Practices (20%);

Responses to Serious Allegations (20%); and

Transparency (10%).

The 2018 results show that the average overall score is 27% (2017: 18%), with two thirds of companies scoring under 30%, and over a quarter of companies score under 10%. There are signs that progress can and is being made, with a number of companies ranking highly, and performing well across multiple measurement themes. However, even these high scores should be approached with some caution. In certain cases, company scorecards incorporate detail on serious allegations of human rights violations, which highlight failings in their overall approach to manage effectively the risks associated with their business.

A Lack of Meaningful Action

While many companies have human rights policies in place, there are gaps in issues covered and inadequate responses to those that are covered. For example:

Few have adequate grievance mechanisms, or appear to provide effective access to remedy. The CHRB reports that of almost 100 allegations reviewed, the remedy provided to complainants was satisfactory in just 3% of cases.

The number of companies that make a commitment to providing a Living Wage for their employees is also very low.

These findings are borne out by Ethical Screening's own research and ESG data which currently covers over 900 listed companies. Clearly, corporate commitments do not necessarily translate into meaningful action in practice.

A need for Increased Regulation

Funding partners to the CHRB include the governments of Switzerland, the UK and the Netherlands, as well as several major asset managers and investors, who are clearly keen to promote improved corporate human rights performance. However, this hands-off approach, which has left industry to regulate itself, is evidently inadequate in many areas. For example, Section 54 of the UK Modern Slavery Act 2015 requires companies operating in the UK to set out what measures they have taken to ensure slavery is not taking place in their business or supply chains, but this is limited by geographical scope and company size. Expanding this approach to an obligation for companies operating globally to implement a business-wide human rights policy as well as mandatory reporting on human rights (with clear consequences for non-compliance) would be an obvious next step.

The failure of so many major corporations effectively to address the human rights risks associated with their operations also reinforces the need for legally binding international human rights instruments to regulate the activities of transnational corporations. Progress is being made in this area. In July 2018, the UN intergovernmental working group tasked with developing an international treaty on business and human rights published a "Zero Draft Treaty" and concluded its fourth round of negotiations in October 2018. Balancing the interests of a range of stakeholders, including states, the business community and human rights organisations, amongst others, is a complex task so many more rounds of consultation and negotiations seem likely. You can find out more and follow the debate via Business & Human Rights' coverage.

In the meantime, the analysis undertaken by the CHRB allows greater scrutiny of corporate human rights performance by a variety of stakeholders, including investors. The FT reports that human rights is an area of growing concern to investors. They attribute this partly to the increased emphasis on responsible investment, but also a recognition that violations can have a financial cost through lower share prices or litigation. Investor and shareholder groups can be particularly effective in engaging with and driving change within individual companies so it will be interesting to see how much progress can be made before the publication of the next Benchmark.